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U.K. Startup Improbable Gets Cash From China Game Giant NetEase

(Bloomberg) -- Improbable Worlds Ltd., a London-based virtual reality startup, has netted new financing from Chinese gaming giant NetEase Inc., in a bid to export its technology to the country’s booming video game market.

NetEase said it’s investing $50 million into Improbable. The Beijing-based company is also buying a similar amount of stock from shareholders, according to a person familiar with the matter. The investment values Improbable at about $2 billion, said another person. Both people asked not to be identified because the terms are private.

Improbable’s SpatialOS software is designed to let programmers create realistic simulations at a massive scale and run them on a cloud-computing network. SoftBank Group Corp. acquired a non-controlling stake in Improbable for $502 million just over a year ago in a deal that valued the company at more than $1 billion.

NetEase, listed in the U.S. with a market value of $35 billion, is one of China’s largest video game publishers, known for bringing the global title Overwatch to its local market. The company’s Kaola e-commerce business is one of the biggest in China’s cross-border online shopping industry.

Improbable’s software powers virtual worlds for massively multiplayer online games, including Bossa Studios’ Worlds Adrift and Spilt Milk Studios’ Lazarus. NetEase is also set to launch a game using Improbable’s SpatialOS platform this year.

But Improbable’s software is not just used for gaming. The startup has strong links with governments for helping build simulations of complex, real-world environments like those in large-scale war games. In early 2016, U.K. officials used SpatialOS to simulate every node on the internet to see what would happen to network traffic in a large cyberattack or a natural disaster.

Improbable hopes its new deal with NetEase will allow it to forge more partnerships in China. Peter Lipka, Improbable’s co-founder and chief operational officer, is moving to the country later this year to build up the company’s presence there. The startup is also assembling a team in Washington to support its work with the U.S. government, according to a person familiar with the effort.